Steel production volumes at Magnitogorsk Iron & Steel Works (MMK Group) are likely to decline in Q1 2020 due to maintenance and operational interruptions.
MMK’s blast furnance and converter facilities are due for maintenance during the quarter while the reconstruction of its hot-rolling mill 2500 is expected to begin in March 2020 causing further operational interruptions, the company noted while announcing its earnings for 2019.
The Russian steel company expects its capital expenditure in the first quarter of 2020 to remain unchanged from Q4 2019 and expects its performance to be supported by improved pricing in the domestic market and steadying prices for key raw materials.
The steelmaker indicated that its performance will be further supported by its actions to improve operational efficiency and increase capacity use of its high-margin production units.
MMK Group’s revenue declined by 7.9pc in 2019 to $7.6bn from $8.2bn in 2018, after Q4 2019 saw a seasonal weakening of business activity. The global price declines in the global steel market and lower sales due to the reconstruction of the hot-rolling Mill 2500 also impacted the company’s EBITDA which fell 25.7pc to $1.8bn from $2.4bn in 2018. The Group’s net profit declined 35pc to $856mn in 2019 from $1.3bn in 2018.
The company’s Russian steel segment’s revenue declined by 7.7pc to $7.2bn compared to $7.8bn in 2018, due to lower prices for metal products, amid Q4 drops in sales volumes. The segment’s EBITDA dropped by 23.6pc to $1.7bn in 2019 from to $2.3bn in 2018.
In Russia, its slab ton cost of sales increased by 4.8pc to $305/mt in 2019 compared to $291/mt in 2018 due to global iron ore price increases. MMK’s slab ton cost of sales in Q4 2019 was reported at $283/mt, down by 9.6pc compared to Q3 2019 due to increased pig iron production in response to lower steel production at the electric-furnace melt shop and less pellets and scrap used in the blast furnace charge. However, the slab cost per ton was positively influenced by improved iron ore and coal concentrate prices.
The company’s Turkish steel segment reported a revenue decline of 16.1pc in 2019 to $520mn, compared to $620mn in 2018, due to economic challenges in the Turkish market. The company partially offset the drop in domestic demand by moving sales towards Europe and the Middle East. This move increased its exports by 33pc compared to the prior year.
MMK Group’s coal segment revenue declined 27.6pc in 2019 to $246mn compared to $340mn in 2018, due to lower coal concentrate prices within adverse market conditions, and lower concentrate sales caused by its beneficiation plant reconstruction.